What is RRP, and how and why to monitor it

A recommended retail price, or RRP, is a single price at which a manufacturer or distributor offers to sell their product to all retailers in the marketplace. Customers will see the same price tag in any offline or online store.

Whether to use RRP or not is a personal decision for each brand or distributor company.

We will tell you what advantages this tool gives to all market players (not just to the manufacturer), how to make it a standard for all stores, and how automated control of recommended retail prices can help.

Why and who needs it?

The primary purpose of RRP (or recommended retail price) is to increase the interest of retailers in a group of products through sufficient margin and absence of dumping on the market. Usually, the RRP price is determined by the brand or vendor: a niche and competitor analysis are carried out, taking into account the average margin of the category on the market. This approach has long worked in electronics and applies to other niches: plumbing, tires and automotive products, pet supplies, children’s toys, home and garden products, and power tools etc.

How it works:

1. You set a single price for a specific product for all sites. A level playing field is created for all retailers.
2. You regularly conduct a cross-section of prices on the market.
3. If one of the partners doesn’t adhere to RRP, you initiate negotiations and work with the retailer on the goods for which you find discrepancies.

With RRP, the competition between sellers is no longer a question of the lowest price offer but a struggle of marketing strategies and level of customer service.

Are MSRP and RRP the same thing?

Vendors or distributors can set the recommended price and the minimum price for retail sales. RRP and MSRP control the retailer’s pricing. At the same time, the minimum retail price is the limit below which the retailer cannot go, even during super promotions and other promotional activities.

What about practice?

The recommended retail price is a tool that allows retailers to maintain a high interest in selling a specific group of goods. Selling above the RRP will be problematic: even if the store’s advertising campaigns are super effective and customers are super loyal, the chances of a drop in sales are very high. Moreover, if someone sets the price tag below – it will provoke an “avalanche” of falling prices from competing stores. As a result, earnings are lowered, retailers become unprofitable to sell goods with minimal (or no) profit, and sales drop.

Both stores and manufacturers are at a disadvantage, but everyone wins if the pricing policy is under control.

How do you make RRP work for you?

Okay, if using RRP will bring your business a real benefit – how do you make it work for all partners? The strategy is simple: it is necessary to conduct a competent calculation and introduce control of RRP. This means you need to know what price the product is sold at each store-partner at any given time.

Of course, the right way to work with “violators” and see if there was a price adjustment after the deviations. This is all individual: for someone, it is enough to send a notice and re-explain the mutual benefits of the tool. Sometimes, it will work if they refuse to carry out joint marketing activities with the retailer, revise bonus payments, block the shipment of goods, or stop working altogether.

Why is it important to monitor RRP?

Retailers themselves are constantly monitoring the prices of their competitors. It takes from minutes to hours for automated tools to detect the slightest reduction in the price tag. The market reacts instantly, and stores start lowering prices to the level of their competitors. This can have the following consequences:

• a reduction in store profits from sales of a particular product;
• decrease interest in your product or group of goods because the margin at such dumping will tend to zero.

RRP monitoring is easy

Of course, if you have thousands of items and hundreds of partners, it is almost impossible to monitor prices manually, even once a day. Even if possible, you can use your time much more effectively and get the results you need in a few clicks in a simple interface of Pricer24.

You can check all retailers 5-7 times a day to see if they are complying with the recommended retail price – this is more than enough for effective monitoring. However, if necessary, you can run checks almost every hour.

But that’s not all. The service doesn’t just collect data on all specified stores and provides information on all irregularities. In Pricer24, you have access to detailed analytics.

Why does one need such complexity? Let’s assume the service has identified and shown you thousands of outliers, and now you need to determine how to rebuild the market. In Pricer24, you get insights to help you decide: what to do, where to do it and where to start. You have access to:

• a complete analysis across the entire market for the selected period – you’ll see which retailers have the most violations, how often and to what extent stores are violating the RRP;
• analysis for each retailer – go through the monitoring parameters and record each deviation;
• detailed information on all problematic aspects – you don’t need to manually search for the store, item, or group of items for which violations appeared;
• answer the question “who is responsible?” – not only can you view price changes over time, but you can immediately track who was the first to lower the price tag.

Using and monitoring RRP can seem like a rather time-consuming process. And, let’s face it, it is if you monitor the market manually. But if you “arm” yourself with a modern automated tool, everything becomes much easier and faster, and the cost of it will be fully repaid. You will be able to “entrust” most of the labor-intensive tasks to the Pricer24 service and automate all the routine processes, including the data collection and analysis.